State Highway Officials Reinstate 30 Projects, Ask Hutchinson For $35 Million From Surplus

Earlier this week, state highway officials reinstated nearly 30 of the 87 highway projects that were shut down earlier this year due to the lack of federal highway funding, and also announced plans to ask Gov. Asa Hutchinson for $35 million from surplus monies to fund a shortfall in state highway revenue.

The actions by Arkansas State Highway and Transportation Department (AHTD) come less than a week after an Arkansas congressional official cited trucking industry support for a diesel tax hike to fix federal highways, and a recommendation by the Arkansas Good Roads Foundation for a 10 cent per gallon increase in the Arkansas motor fuel tax to raise $125.7 million for state highway needs.

According to AHTD officials, the reinstatement of highway projects across the state that were withdrawn from bid openings in the 2015 schedule was due to recent legislation by Congress to extend federal highway funding until Oct. 29. The congressional quick-fix shifts $8.1 billion to the federal Highway Trust Fund (HTF), which will reimburse Arkansas for a portion of its highway spending that amounts to 70% of total construction costs.

“We would like to thank Arkansas’ congressional delegation who all voted in favor of extending (Moving Ahead for Progress in the 21st Century) MAP-21 and for providing the money needed to keep the HTF solvent for the next several months,” AHTD Director Scott Bennett said in a news release. “This will allow some of the delayed projects to be phased back into bid lettings scheduled for October, December, and possibly February 2016. This is great news for the state’s economy as we head into the fourth-quarter of the calendar year.”

The short-term infusion of funds is projected to keep federal highway officials from having to implement cash management procedures until spring 2016, the AHTD said. Since December 2014, Bennett said AHTD has been evaluating its cash flow to ensure the agency could continue to pay contractors for on-going federally-funded highway construction projects in the event cash management procedures were implemented this fall.

“With the threat of reduced or delayed federal fund reimbursements looming this fall, we opted to take the more fiscally conservative approach and not let projects to contract that we might have to suspend or cancel in the future because of the inability to make contractor payments,” Bennett said.

Nearly a week ago, U.S. Rep. Rick Crawford, R-Jonesboro, said increasing the diesel tax to pay for highway maintenance and improvements is “something to be considered” because of trucking industry support. Crawford said the trucking industry opposes tolling, but does support increasing the diesel tax that not been raised at the federal level since 1993.

“You can’t say that that window of opportunity is going to stay open indefinitely,” Crawford said. “There may be a point at which the trucking industry says, ‘All right, you had your chance. We’re not going to be open to a diesel tax increase anymore.’”

However, Bennett said the need for additional funding is not exclusively a federal issue. Additional state funds will be necessary to address transportation needs in Arkansas. AHTD’s Annual Overlay Program is traditionally funded with 100% state funds and has typically ranged between $30 million and $50 million. However, because of a shortfall in state highway revenue, this year’s overlay fund had to be financed with federal funds and was subsequently cancelled.

“We hope to have an overlay program next spring,” the AHTD director said. “We have asked Gov. Hutchinson for $35 million of state surplus money to help support and guarantee the program for 2016. Otherwise, at this time we still aren’t sure there will be an overlay program next year.”

“The Governor has received a letter from Highway and Transportation Department requesting Executive GIF funds. As with any GIF request, the Governor will take it into consideration with other needs of the state,” said governor’s spokesman J.R. Davis.

During the 2015 legislation session, Gov. Hutchinson formed the Governor’s Working Group on Highway Funding, which is exploring the transportation funding problem and will hopefully identify a long-term solution that will provide a sustainable source of state revenue for Arkansas’ highways.

“We appreciate the leadership and support of Governor Hutchinson in establishing this working group, and we look forward to the results leading to a long-term, sustainable way to increase our investment in Arkansas’ highway system,” Bennett said.

Just last week, Craig Douglass, executive director of the Arkansas Good Roads Foundation, wrote in a letter to the Governor’s Working Group that the 10-cent increase would be the quickest way to close a short-term funding gap facing the state highway department.

A 10-cent increase in the fuel tax would raise $138 million total. However, only about $87.6 million would go to AHTD because 36.5% of fuel tax dollars go to other needs. A 10-cent increase in the diesel tax would gross an additional $60 million, providing a net $38 million to the Highway Department for the same reason.

Douglass argued in the letter that this would be a good time to raise the motor fuels tax because of declining motor fuels prices, as oil is now less than $40 per barrel. Other states – Georgia, Idaho, Iowa, Nebraska, South Dakota, Washington, Utah, Maryland, and Rhode Island – have increased fuel taxes recently. A special session would be needed to raise motor fuels taxes quickly.

Bennett said the short-term infusion of money from the federal highway trust fund will provide some relief for the state until spring 2016. But, future uncertainty past that date is still a major cause for concern for federally funded projects scheduled for next year.

At risk in 2016 in Arkansas are 130 projects worth an estimated construction value of $520 million. Bennett warned that without a long-term solution, the likelihood of resuming the task of withdrawing of projects from bid openings beginning in early 2016 is a possibility.

Bid openings for the reinstated projects will begin in October. Absent from that list are 49 resurfacing projects valued at more than $50 million, that would have been AHTD’s 2015 Overlay Program. This is because the latest HTF fix comes at a time when the overlay season is winding down and weather is not conducive to completing the work.

“We hope a long-term fix is in place by the spring so these important projects to preserve our system can also be reinstated,” Bennett said.

On the federal front, meanwhile, both Crawford and Sen. John Boozman, R-Arkansas, told Talk Business & Politics last week they are hopeful that Congress would pass a Highway Bill that would create a new revenue stream of more than $478 billion that would pay to repair the nation’s highway infrastructure.